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It is really quite hard to let someone help you.
Say you have a flat tire on the highway. Someone pulls over to help - is your first thought to thank them, or does that warning voice in your head start looking for trouble? Trust is a major issue whenever we let someone help. Will this stranger help or hurt us, jack up our car or our wallet? Will we be a success story or a statistic?
These are the same issues and emotions involved in the decision to outsource. Can we trust this outside company? Are they competent? Will they rip us off? The answers to these questions may take years to determine, and each person involved will have their own opinion of the outcome. At some level, every outsourcing transaction relies upon trust. As the outsourcing decision-maker, you must have some level of trust in the outsourcer, or you will never consider hiring them. On the other side of the table, the outsourcing vendor must build a degree of trust in your company's capabilities and level of commitment. The best way to insure trust is for you to be very specific in what you need help with, and for the vendor to be clear about what they can deliver.
In the corporate environment it is difficult to answer the most basic questions around outsourcing; whether for IT systems, software, networks, or facilities. So much of the hype and tension around outsourcing is related to hearsay and individual experience. Just bringing up the subject can be harrowing. Before you broach the subject in an open meeting, here are a few basic indicator questions:
These are basic make/buy decision points. To return to the side of the road for a moment, having a jack in the trunk is not the same as being able to fix the flat. In the case of IT outsourcing, your company may lack experience in migration, or expertise and training in complex systems management tools. The basic question becomes, can our existing staff and tools do the job? And the follow-up question is, should they? Most companies can say whether or not their core competency is IT, and many non-technology companies now consider IT a core competency. Even for companies where IT is core, does this core competency include IT cost management?
All these questions assume there is a discreet project or function with an identifiable outcome.
These are great starting points. Tasks that can be identified as a project with a beginning, middle and end are more likely to be successful. They are also easier to benchmark. In contrast, requests to "outsource software migration", "implement VoIP" and "rollout new tools for remote users" may be the same projects, but service providers may have a hard time getting the correct scope and scale, not to mention price.
To an outsourcer, scope creep is the great unknown, the difference between the "P" and the "L" in "Profit & Loss". Of course there are contractual issues, what you contract for in the SOW (Statement of Work) will be what you (hopefully) get. Better to spend a few weeks thinking about what you really want than to have a contract that will not get to signature.
Outsourcers, of course, are very willing to help you figure out what you need and even show you a comparison to what it would cost you to do it yourself. But they can't know what you don't know. Without a solid start and end point the outsourcer doesn't know if you just want the lug nuts loosened or a chauffer to drive you to your destination in style.
As with anything we ask someone to do for us, the how depends on who you ask. Ask a 17-year old for help with a flat and you are likely to be short a few lug nuts. Ask a mechanical engineer and you are likely to get a lesson on torque.
The real question in outsourcing is; do you care how the service provider performs the task at hand? Most process questions are really credibility checks in disguise. You will shortcut a lot of frustration by keeping the qualifications separate from the process questions. Some jobs do require application of industry standard practices. For example, Windows 2000 registry setup work is based on implementing the software manufacturer's requirements in a customized environment. Even so, you probably don't need Capability Maturity Model (CMM) Level 5 (Space Shuttle life support systems) quality on board just to make sure email routes properly.
Outsourcers rarely try to sell a higher level of quality control than is really needed because that level of expertise is very expensive. To avoid inadvertently pressuring the outsourcer to aim too high, ask for references rather than specific methodologies. What companies with a similar scope have they worked with? How long did the project or handover take? How many people were involved? Does the Project Leader have solid references for similar projects? Will that Project Leader be involved throughout the project?
If you use project status reports as a control mechanism, think about the impact on your staff and the outsourcer's staff. If the outsourcer is providing 3 people to do a month long job, weekly 2 hour project review meetings may be overkill. Let the frequency of review match the contracted unit rate, be it 100's of lines of code or man months of effort.
Whenever two organizations work together, differing business models will impact timescales and deadlines. A smart outsourcer understands your business and can work with you, but don't count on it. As the customer in the outsourcing deal, you must take a lead role in educating the outsourcer about your critical business periods. If the outsourcer is working toward an end of month deadline, make sure that the ongoing business units are not planning a major month-end project using the same resources. Issues such as data backups, power outages, and customer access to data need to be discussed with all groups that use the systems or facilities in question. In general, it is not advisable to set a project deadline that coincides with a critical business cycle such as year-end or a major selling/shipping period. Take a hint from the manufacturing sector, plan major systems changes during slow sales periods.
Are you biting off more than you can chew? Make sure the services you are asking for are both within your span of control and within your scope of accountability. If you work for a Global 1000 company, it may be very tempting to sit in a Manhattan office tower writing an RFP for a Global outsource. But unless you know how much your international counterparts are spending on the services in question and why, your overseas fellows will view your opinions as domestic and pedestrian. There are very few things that can be globally outsourced. When it comes down to the fine print, local support is provided - well, locally. In Lima, Peru (or Peru, NY) the same technician may work for Unisys, IBM and Getronics. Even worse, they may already be contracted to your company and adding an outsourcer only adds cost for something you already have. In any event, currency risk makes most global deals national deals in the end.
A better idea - and a lot more fun - would be to set up standards which can be agreed globally. One idea is to establish a Standards Steering Committee in a quarterly round robin format where each of the regions hosts the Committee once each year.
There are some places in the world where business is done in a definitely un-US way. Take, for example, the Middle Eastern Sultanates. There, your company's sponsor determines business partnerships, and it is considered impolite to choose a partner who does not enhance your sponsor's position. This is not very different from the situations in the US where a bank uses a major customer for certain services, this is especially true in the current Venture Capital markets. So before issuing a Global edict for the cheaper outsourcer, you may wish to exempt certain areas or services for business reasons not related to the task at hand.
Here are a few basic questions, answering them will allow you to form the basis of an argument either for or against outsourcing. Use them in evaluating the likelihood of the project being a boon or a boondoggle.
It makes perfect sense to outsource projects or functions which are not core competencies. To determine if the outsource will be a success, it is necessary to know more about your company than the outsourcer. In my next article, we will focus on answering these questions in a way that will get you back on the road.